ridehail math

[mindstalk]

Ridehail being a more accurate name for Lyft and Uber than 'rideshare'.

Some people talk as if ridehail is the wave of the future, to become a dominant transit mode, despite neither company reporting profits yet. Let's see what that would be like.

The average American driver drives 15,000 miles a year. Ridehail cost per mile component is around $1. Total cost of urban trips (based on a sampling of the apps in Boston and LA) is $2-4/mile, going down the longer the drive is, maybe around $2/mile for 10 mile trips. If you replaced your car with ridehail, you'd be paying $30,000/year. Trés affordable! /s Now, maybe a lot of those miles are longer road trips you wouldn't use ridehail for, so your local driving might be 10,000 miles; that's only $20,000.

Different approach: the app prices are more constant in time units, about $1/minute. The average commute to work is 30 minutes; if you ridehailed to work, you'd be paying $60/workday, or $15,000 over 250 workdays (a year). That's just for your commute, never mind groceries, taking kids to school or things, going out...

That's all for the original product, single person on demand. If you do the Lyft Line/Uber Pool approach, that can halve costs. A mere $7,500 for your work commute! ...assuming no rush hour surge pricing. And car pooling has more time variability, of course. For the 10,000 miles of local driving, $10,000/year. Not that far from estimates of total cost of car ownership for 15,000 miles/year.

Urban car trips tend to be 15-30 MPH, I figure; 10,000 miles is 20,000 to 40,000 minutes, so $20-40K/yeared, or $10-20K pooled.

Competition is fierce, neither company is profitable, and there's doubt as to whether it's really profitable for drivers if they accounted for all costs, so prices are more likely to go up than down.

My T pass is $1014/year. Granted it's often slower (not at rush hour!) It's also 90-99% less likely to mangle or kill me, but most people don't worry about that.

Comments

[mtbc]

I found it worked well somewhere with decent transport and population density like Greater Boston to usually use a T pass and sometimes hire via Zipcar. Sometimes it's very handy to have a car and, of course, once you have one the incremental costs of using it more tend to be smaller.

[heron61]

Competition is fierce, neither company is profitable, and there's doubt as to whether it's really profitable for drivers if they accounted for all costs, so prices are more likely to go up than down.

My partner teaotter has done numerous lost income calculations for ridehail (good term) drivers. Lyft pays notably more than Uber, but even there profits range from 20% (quite common) to (at most) 50% of payments to the driver, and the later is only for drivers in urban areas who are exceedingly clever about when and where they turn on their app.

Of course, these services got approved because they claim that drivers make as much as taxi drivers, which isn't remotely true, because taxi drivers (like people in almost every other industry where bills are often paid in cash) almost always report well less than all their income, while ridehail drivers by definition report all of it.

[mindstalk]

> profits range from 20% (quite common) to (at most) 50% of payments to the driver

You mean, of their payments (post-tax?), 20% to 50% is profit, after paying for the expense of driving and/or maintaining the car? I assume the profit is what constitutes their practical income (rather than profit above some assumed wage.)

> these services got approved because they claim that drivers make as much as taxi drivers

Did they get approved? I thought they simply barged into the scene.

> almost always report well less than all their income

On the one hand, sympathy with the working man; on the other, less sympathy with people who benefit from government-created scarcity and then also evade taxes.

[teaotter]

Let me clarify a bit, because the numbers I care about at work aren't the ones most people care about:

Most drivers make about 25-45% gross profit. In other words, their variable expenses -- the app company's fees, gasoline, maintenance on the vehicle, and depreciation -- eat up about 55-75% of their revenue.

Out of the money leftover from those expenses, they still have to pay fixed expenses: insurance and any business license fees that their state or municipality require.

Before taxes, most of the full-time drivers I've seen are making about $18,000 a year, and they have to pay both income and self-employment taxes. Until very recently, taxi driver income was more than twice that.

[mindstalk]

Belated thanks for your comment!

[heron61]

Did they get approved? I thought they simply barged into the scene.

At least in Portland, they barged in, but a bit later had to be approved, and that's true for at least some other cities.